"You are preapproved for a Gold MasterCard that celebrates puppies and kittens," the mailer purred. The celebration means the credit-card company puts photographs of photogenic puppies and kittens on the card. Consumers can pick a card featuring a cute golden retriever puppy hugging a ball. Or two kittens with their heads sticking out of pots. Or four puppies in a barrel.
Just what America needs: Another reason to charge it. Put the purchase on plastic and you can look at cute puppies and kitties, and say, "Aaaawwww."
The offer waives any application fee and includes an introductory interest rate of zero percent. The fine print points out that starting in 2002, the interest rate will be the prime rate, plus 11.8 percent. There is a $25 fee for late payments, a $25 charge for going over your credit limit. If you send two consecutive payments late or below the minimum payment, the lender can charge you on the balance the prime rate, plus 17.9 percent -- which last month worked out to 25.9 percent annually.
Thus, financial institutions can profit handsomely from cardholders' runaway debt. Charge it, mount up your revolving balance to the point where you can only afford to make minimum payments, add more debt so that even the minimum payments fall behind, and the bank profits even more. Go ahead, make their day: Miss two payments.
Meanwhile, expect the same banks to bellyache to Congress about carefree deadbeats who rack up debt. Their lobbyists have been pushing for a tough new bankruptcy bill to protect them -- from their own rapacious business practices.
To oblige, both the Senate and House have passed souped-up bankruptcy bills.
Once the Senate settles a dispute as to how many Democrats belong on a joint- conference committee, the committee is expected to hammer out a bill that President Bush will sign.
It is astonishing how united Washington can be when it comes to passing laws to protect banks from themselves. The president who (rightly) rejects energy price caps, (wrongly) endorses bankruptcy regulation to protect the banks from the free-market consequences of their risky lending choices. Republicans are behind him.
Meanwhile, many Democrats have come to the rescue of big banks that seduce the working poor to buy now and pay later. And pay later. And pay later. These Dems support putting a tighter squeeze on cardholders, but not on banks.
As Travis Plunkett of the Consumer Federation of America noted, "At the same time that they're asking Congress for harsh bankruptcy restrictions, (banks') marketing practices are pushing more families closer to the financial brink." A report by the credit-card research firm BAIGlobal Inc. found that the number of solicitations hit an all-time high of 3.45 billion mailers last year. BusinessWeek reports that last year 32 percent of college students had four or more credit cards.
The new bankruptcy bill would require that in-over-their-head borrowers undergo credit counseling before hitting bankruptcy court.
What about the banks? Any bank that issues a college kid a fourth credit card is begging for another bankruptcy. Why not make the banks undergo counseling?
Start with a group therapy session with puppies and kitties. Call it a special introductory offer.